© 1989

The Rational Expectations Equilibrium Inventory Model

Theory and Applications

  • Tryphon¬†Kollintzas

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 322)

Table of contents

  1. Front Matter
    Pages I-XI
  2. S. Rao Aiyagari, Zvi Eckstein, Martin Eichenbaum
    Pages 34-68
  3. Lawrence J. Christiano, Martin Eichenbaum
    Pages 70-108
  4. Jeffrey A. Miron, Stephen P. Zeldes
    Pages 199-244
  5. Kenneth D. West
    Pages 246-269
  6. Back Matter
    Pages 270-271

About this book


This volume consists of six essays that develop and/or apply "rational expectations equilibrium inventory models" to study the time series behavior of production, sales, prices, and inventories at the industry level. By "rational expectations equilibrium inventory model" I mean the extension of the inventory model of Holt, Modigliani, Muth, and Simon (1960) to account for: (i) discounting, (ii) infinite horizon planning, (iii) observed and unobserved by the "econometrician" stochastic shocks in the production, factor adjustment, storage, and backorders management processes of firms, as well as in the demand they face for their products; and (iv) rational expectations. As is well known according to the Holt et al. model firms hold inventories in order to: (a) smooth production, (b) smooth production changes, and (c) avoid stockouts. Following the work of Zabel (1972), Maccini (1976), Reagan (1982), and Reagan and Weitzman (1982), Blinder (1982) laid the foundations of the rational expectations equilibrium inventory model. To the three reasons for holding inventories in the model of Holt et al. was added (d) optimal pricing. Moreover, the popular "accelerator" or "partial adjustment" inventory behavior equation of Lovell (1961) received its microfoundations and thus overcame the "Lucas critique of econometric modelling.


business cycle econometrics economics equilibrium industrial organization organizations

Editors and affiliations

  • Tryphon¬†Kollintzas
    • 1
  1. 1.Department of EconomicsUniversity of PittsburghPittsburghUSA

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